CIPR | Center For Inter-American Policy & Research

Tulane University

CEQ Working Paper No 9: The Incidence of Social Spending and Taxes in Peru


The Incidence of Social Spending and Taxes in Peru
Working Paper No. 9

A working document by:
Miguel Jaramillo Baanante
_ Group for the Analysis of Development (GRADE), Lima, Peru_

Abstract
Standard tax and benefit incidence analysis is used to estimate the effects of fiscal policy on poverty and inequality in Peru. Results suggest that the extent of inequality and poverty reduction induced by Peru’s fiscal policy is small. This result is associated with low social spending rather than with inefficient spending. Most social spending components are progressive and overall social spending is also progressive. We find that direct cash transfers are well targeted and are especially effective in reducing extreme poverty in rural areas. We also find that in-kind transfers are effective in reducing inequality. Finally, direct taxes slightly reduce inequality, while, countering intuition, indirect taxes are neutral once informality is incorporated in the estimates.

Access the working document here:
Updated May 2013
CEQ Working Paper No 9: The Incidence of Social Spending and Taxes in Peru

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